United Kingdom


In March 2013, the Financial Reporting Council (FRC) issued FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. This is the main part of the new UK GAAP regime and follows the issue in November 2012 of FRS 100, which explains the framework, and FRS 101, which allows the individual accounts of qualifying parent and subsidiary entities (as defined) to be prepared under EU-IFRS recognition and measurement but with reduced disclosures from the full IFRS standards. A specialist standard (FRS 103 PDF 521KB) for insurers has now been issued.


    Accounting regime Applicable to


    • Those required to apply by law or regulation. Optional for others.
    FRS 101 Reduced disclosure framework
    • Individual accounts of qualifying parent and subsidiary entities

    FRS 102

    • Large and medium-sized entities. Optional for others not required to apply EU-IFRS.
    FRS 102 with reduced disclosures
    • Individual accounts of qualifying parent and subsidiary entities

    FRSSE (2015)

    • Eligible small entities
    • Micro-entities incorporated under the Companies Act 2006

    FRS 100

    FRS 100 sets out which framework an entity must or may apply. It does not impose EU-IFRSs beyond existing requirements. In a related change to the Companies Act, for financial years ending on or after 1 October 2012, some companies that previously applied EU-IFRSs in their individual accounts may be able to change framework (to FRS 101, for example, or to existing UK GAAP). See the October 2012 Financial Reporting Update for more details of this change to the Companies Act. 


    FRS 101

    FRS 101 cannot be applied in any group accounts or in the individual accounts of a charity. Since accounts prepared under FRS 101 are Companies Act accounts, they must comply with the accounting requirements of the Act. This means that certain amendments to EU-IFRS must be made by an entity adopting FRS 101. They include:

    • applying the balance sheet and profit and loss account formats of the Act (even if the entity is not a company);
    • for business combinations:
    • invoking the true and fair override to support non-amortisation of goodwill;
    • deferring negative goodwill in the balance sheet for gradual release to profit; and
    • accounting for contingent consideration on the old UK GAAP basis (recognise best estimate when probable; adjust to goodwill).

    Some of the disclosure exemptions under FRS 101 are contingent on the parent's consolidated accounts giving equivalent disclosures. The meaning of "equivalent" is considered in the application guidance to FRS 100. Fewer disclosure exemptions are available to qualifying entities that are financial institutions (as defined). The exemptions of FRS 101 include certain disclosures for:

    • share-based payment arrangements
    • business combinations
    • cash flow statements
    • related parties


    FRS 102

    FRS 102 is based on the IFRS for SMEs, with amendments for application in the UK. It incorporates some significant differences from EU-IFRS, including:

    • requiring the Companies Act formats to be applied by all entities, including non-companies;
    • requiring the amortisation of goodwill;
    • permitting the expensing of borrowing and development costs;
    • a “timing difference plus” approach to deferred tax; and
    • a different approach to financial instrument accounting.


    The differences from current UK GAAP include:

    • a different approach to financial instrument accounting, including the recognition of derivatives at fair value;
    • recognition of deferred tax on revaluations, rolled over gains and fair value adjustments in a business combination;
    • the recognition of more intangible assets in a business combination; and
    • no multi-employer exemption in relation to group pension schemes: any liability (or asset) is recognised on at least one entity’s individual balance sheet.

    Like FRS 101, FRS 102 includes a reduced disclosure regime which will allow the individual accounts of qualifying parent and subsidiary entities to omit certain disclosures.  Unlike under FRS 101, charities may be qualifying entities under FRS 102.  The disclosure exemptions include cash flow statements, certain group share-based payment disclosures and (unless the qualifying entity is a financial institution) information about financial instruments. Under FRS 102, all financial institutions must make additional disclosures about financial instruments.

    Effective date
    FRSs 100-102 are applicable for accounting periods commencing on or after 1 January 2015.  This will require (for 31 December year ends) a transition balance sheet to be prepared as at 1 January 2014.  FRSs 100 and 101 can be adopted early with immediate effect, regardless of the accounting period (although see the earlier comment on switching back from EU-IFRS to UK GAAP).  Early adoption of FRS 102 is permitted for periods ending on or after 31 December 2012.


    “And it’s not just about the accounting.  We work closely with our colleagues in tax, treasury, pensions and other advisory areas to ensure you get a complete solution to your accounting and business needs” - Sarah Hughes, Director in Accounting Advisory Services


    Your Issues

    • What are the differences between EU-IFRS and FRS 102 - should you adopt a higher tier than you are required to?


    • Your company is converting to EU-IFRS - what are the key accounting differences? Are there choices that may mitigate volatility of reported earnings?  


    • What is the likely impact on distributable reserves and can you take any action now to mitigate the risk of dividend blocks?  


    • What impact will the changes have on reported taxable profits and existing tax planning?  


    • What about the wider business consequences? How will conversion impact performance-related remuneration, loan agreements and other contractual relationships, internal management information and external communication?  


    • Conversion may be a time intensive project – how will your finance team cope with this along with their usual finance roles?  

    Examples of how we can help

    Our team can:


    • perform an initial impact assessment, highlighting the differences between EU-IFRS, FRS 102 and current UK GAAP;


    • identify the key accounting differences and their likely impact on profit or loss;


    • provide advice on how to mitigate the impacts of conversion (e.g. regarding potential ‘dividend blocks’ and minimising profit or loss volatility);


    • work with our tax colleagues to assess the impact of conversion on cash tax and to assist with tax planning;


    • recalculate internal management information, KPIs and forecasts;


    • perform a performance related pay review and bank covenant review;


    • provide resources/secondees to assist with the conversion project.